Donald Trump reopens door to TPP participation, Asia reset

Donald Trump has backed a fresh drive by the United States to re-engage with Australia and Asia on trade deals such as the Trans-Pacific Partnership, which he bailed from during his first week in office, says a rising Republican senator who instigated the push.

In the final hours of 2018 Donald Trump signed into law an act that reopens the door to a TPP-style deal in Asia. CARLOS BARRIA

However, the enacting of a new law is a significant step for the Congress and White House, which have delivered a bold statement of intent that the US is determined to stay engaged across the Indo-Pacific on security and trade.

It represents a major effort to assuage allies' concerns that a US withdrawal would create a power vacuum in favour of a more assertive China.

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The so-called Asia Reassurance Initiative Act (ARIA), which Mr Trump ratified without fanfare as one of his final acts on New Year's Eve, includes a call for the US to return to multilateral trade deals, countering the President's own tendency to pursue agreements with individual countries such as Mexico, Canada and Japan.

Responding to questions from The Australian Financial Review, Republican senator for Colorado, Cory Gardner, who spearheaded the law's passage through Congress, described it as an opportunity to "re-engage in trade conversations" including the Trans-Pacific Partnership.

"This bill has broad support, not only within Congress, but the administration itself," Senator Gardner said.

"They [the White House] signed off on an agreement that has multilateral, bilateral trade language in it and we need to pursue that."

The reassurance act, which includes additional spending of $US1.5 billion ($2.1 billion) a year to improve US ties with partners for the next five years, bookends a dramatic and often chaotic year on US trade and security policy.

Comfortable assumptions about the current global order have been thrown into question by the President's initiation of a bruising tariff war with China, which threatens to slam global growth and trigger recession in the US, according to some investors and economists.

The law's sponsors anticipate the move will reassert Washington's long-standing leadership role in the Indo-Pacific.

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It has also drawn fresh criticism from Beijing, which said it was "resolutely opposed" to new provisions in the law that call for more official ties between the US and Taiwan, and regular arms sales.

There's a group of "young senators, the rising stars, on foreign affairs and national security who are gravitating to Asia, including Senator Dan Sullivan from Alaska.

On trade, the new law states that Congress supports "multilateral, bilateral, or regional trade agreements with partners" that "comply with trade obligations and respect, promote and strictly adhere to the rule of law".

In contrast to the President's "America First" rhetoric and stance, polling suggests a growing majority of Americans recognise and support US engagement in Asia as well as the need for strong alliances in the region, said Michael Green, an Asia expert and senior adviser at the Centre for Strategic and International Studies (CSIS) who was consulted on the bill.

"There's two Americas. One is Trump. And the other is real America that knows how important Asia is and alliances," Mr Green said. "The ARIA legislation passed by a very large margin."

Strategic blunder?

By signing the law Mr Trump is being seen in some circles to have softened his administration's stance on the TPP. The President pulled the US out of the Trans-Pacific Partnership in January 2017 after campaigning against the pact, which was also heavily criticised by his Democrat opponent, Hillary Clinton.

While it is expected to take time before ARIA is turned into concrete action, Mr Gardner indicated that it reflected the will not only of both sides of Congress, but Mr Trump as well.

ARIA "opens up a new door of opportunity for the United States, Australia and others in Asia to come to a new agreement," Mr Gardner said.

"We really [need to] build on the high standards of TPP and try to put that into effect in multilateral and bilateral engagements."

The significance of the legislation has been largely unreported in Washington where the lengthening partial government shutdown has dominated the media's focus.

However, its passage through the law-making pipeline is a clear sign that after several years of antagonism against trade deals in Washington a new mood has emerged, suggested David Dollar, a former US Treasury official in China and now at the Brookings Institution.

"The whole 2016 election – not just candidate Trump, but candidate Clinton – had a certain anti-trade agreement character," he said in an interview. "And I would argue that we are now swinging back to free trade.

"The tariffs we've imposed on China are hurting US firms, farmers and consumers, so that's proving to be a rather failed strategy. The steel tariffs have ended up costing a lot of jobs in the US and other countries are not rolling over and giving in to the US."

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Mr Dollar said a return to the TPP was in effect already under way by the Trump administration, which included large swaths of the jettisoned deal's language in its renegotiated trade agreement with Canada and Mexico.

"Looking at individual negotiations like the new NAFTA and the US talking to Japan, it struck me that USTR [US Trade Representative] is just taking old chapters from the TPP. So that's a stealthy way of getting back into it."

The Asia Reassurance Initiative Act is being seen by some Washington observers as a major victory for a new generation of emerging Asia-focused Republicans and Democrats.

Not only are they filling a space previously dominated by figures such as Senator John McCain, who died last year, they are looking at America's relationship to the rest of the world once Mr Trump leaves office.

There's a group of "young senators, the rising stars, on foreign affairs and national security who are gravitating to Asia. They're not choosing to work on the Middle East or Europe," Mr Green said.

This includes Republicans like Senator Gardner, Senator Dan Sullivan from Alaska, Iowa's Joni Ernst, as well as Hawaii Democrat senator Brian Schatz.

While the ARIA legislation was first planned three years ago, before the Trump administration, it has been seen as a much-overdue restatement of American purpose in Asia.

"Whether it's solid rule of law, whether it's solid trade agreements that we need to get back into, whether it is the idea of security and country terrorism assistance, this is an all-of-the-above soup-to-nuts strategy for our presence," Senator Gardner told a forum hosted by the CSIS last week.

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It reassures allies and sends a "signal to China and whoever else that we're not walking away and that we are going to stand up for what we believe in when it comes to economies, trade, human rights," he said. "We are not going away."

Trade resolution expected

The new Asia push comes as expectations grow of a resolution in the current trade dispute between Washington and Beijing, which is currently subject to a ceasefire.

Following three days of talks between mid-level officials in Beijing last week, both sides are preparing for higher-level discussions.

President Xi Jinping's chief economic official, Vice-Premier Liu He, is scheduled to visit Washington this month for talks with US trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

However, there have been fears that the partial US government shutdown could force a delay in the talks.

Last week's talks have been described by both sides as effective enough to lead to further discussions.

Mr Trump and Mr Xi agreed at a meeting in Argentina on December 1 to 90 days of negotiations in exchange for the US suspending a planned hike in tariffs on $US200 billion of Chinese goods.

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The White House is also working on a new deal with Japan, after renegotiating NAFTA last year with Mexico and Canada.

All three countries are already members of the TPP, which has been renamed as the Comprehensive and Progressive Trans-Pacific Partnership and came into force on December 30 for the first nations including Australia, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam that have ratified the pact. Two rounds of tariff cuts have already been applied.

Before the US withdrew, the original TPP was set to become the world's largest free trade deal, with the equivalent of 40 per cent of the global economy. The current agreement covers 13 per cent of the global economy.

Rather than rejoining the TPP, the President's new trade agenda for Japan shows the "pitfalls of Trump's one-on-one approach to trade deals," wrote Gary Hufbauer and Zhiyao Lu at the Peterson Institute for International Economics, in an analysis published late last week.

"It demands many concessions from Japan that Prime Minister Shinzo Abe is likely to reject and that cannot be offset by concessions from other countries as would be possible in a plurilateral setting," they said.

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Jacob writes about American politics, economics and business from our Washington bureau. He earlier was the Canberra-based economics correspondent and has held reporting jobs in Sydney, Zurich and Brisbane across more than two decades. Connect with Jacob on Twitter. Email Jacob at jgreber@afr.com.au